I normally do not look at 1&4 hrs TF but this set up is so beautiful that simply I could not ignore that.
You know that I am long from 107. See “Related Ideas” below. It has been two days since USDJPY has started to make a formation and this has every single element of learning which we are going to review here.
In a 15 min TF price attempted to break the key and failed. See the first red circle. Then attempted again for the Second time and failed again. This is what we could as a False breakout of the lows and we like it Long as if makes a lower low only by a few pips. If you go to 5 min TF you see that in fact the price attempted three times and failed. By that time we did not know that we have a formation.
Then after it became clear that it is a formation price came back lower to retest the support line again. But see how it failed for another time, this time not even being able to get to the dotted blue line (support) and as the matter of the fact that turned out to be a false breakout again but this time a false breakout of the formation.
And in a very shorter TF see the pullback now into the New support levels and EMAs
Now let’s get into the underlying markets to see why we think YEN has been weaken and USD has been appreciated. First we going to review YEN:
1) This is weighted average YEN (daily). You know that I have been on YEN for weeks now. Yen has been grinding lower even though all other underlying Japanese markets suggested a very sharp fall of the YEN. The problem in my opinion was with these EMAs and see how yesterday YEN has passed it. I cannot see anything else to stop a sharp fall of the YEN for the next a few days, at least to the New neckline!
2) This is Yen and it is sort of self-explanatory. In my previous posts I highlighted this Flag and yesterday this Flag was broken but there has been like one day lag in FX and the YEN currency has just responded to that break.
3) Beautiful Nikkei break of the Neckline on last Friday and this Monday and see how clean it retested the Neckline and bouncing now. This is Nikkei .
and see how much room Nikkei has !
To be honest the huge moves on Nikkei on last Friday and this Monday led me to invest more in USDJPY . It was a clear signals of USD appreciation and Yen weakness.
4) This is Japanese 10 Yrs Yields and see how much upside room it has. This is equal to the Yen weakness.
5) This is Japanese bonds and see where we are now. Then neckline is about to be broken.
That was it for Yen. Now let’s look at USD
Anyway this is weighted average USD. See how it broke it recently and the price held above the falling trend line. Also do not forget that the weighted average YEN and Nikkei (future) shown above have opposite correlation with USD. I believe USD can hold above the falling trend line for the same reason that YEN weighted average could not stay above falling trend line. If you are not convinced with the chart below, do not worry I have a lot for you.
2) Here is the most important chart of this trading idea. Amazing, astonishing breakout of the TNX. Broke 2016 resistance at 3.04% and now is around 3.10%. We got there a month ago and the price could not break it. But see the significant breakout. 10Yrs Yield got the same message too.
And I thought why not zoom in again.
3) US 10 Yrs bonds and YES another H&S is about to be prepared and see the potential of USD strength here. Just amazing.
4) Where both USD Weighted average and DXY shown some minor signs of the pullback USD futures just did not shown any of these signs and it is just heading higher and higher.
5) This is the interesting part when bond futures broke both H&S Neckline and two key support levels recently. This is in line with TNX and other USD underlying markets.
6) And if you have been following me on GOLD you know that my third short trade on Gold is also about to get to the target. Cheaper gold simply means stronger USD because your USD purchase power increases and you can buy more GOLD with it.
7) Last chart is EURO weighted average. EURO and USD also has opposite correlation. Another significant breakout on EURO. Hope you have been following my EURUSD trade too.
Thanks for reviewing this idea.
With kind regards and thanks,